Advice From Health Investors to First-Time Founders
Are you a first-time health or life-sciences founder financing a new startup? These five experienced health investors share their insights and advice.
James Hardiman, Partner, DCVC
Scott Kaplanis, Partner, Epic Capital Management
Nilay Thakar, Associate, ARCH Venture Partners
Brenda Irwin, Managing Partner, Relentless Venture Fund
Damian Lamb, Managing Director, Genesys Capital
Transcript with timestamps (click here)
What’s your advice to a first-time founder in the life-sciences or health space who needs to finance a new startup?
James Hardiman, Partner, DCVC [00:10]
For first-time founders, my advice is that the entrepreneurial journey tends to be about making something out of nothing. So fundraising processes tend to be extremely hard. And you’re going to get a lot of “no”s, right. You’ll probably get 19 “no”s for every single “yes”. And it’s not uncommon for an entrepreneur to go through a six-month fundraising process in order to raise capital.
I think it’s very important that you identify the right financiers for the stage of the company. So if this is a first-time founder raising capital for the first time, you should likely be talking to angel investors, or kind-of pre-seed or seed-stage funds. If you go and talk to later-stage investors, it’s unlikely that the company is appropriate for their stage of investment. So you’ll burn a lot of time talking to those investors and explaining your company to them, and ultimately, the answer will just be no. And you could have known that, kind-of, upfront before you even spoke to them.
Scott Kaplanis, Partner, Epic Capital Management [01:07]
As a founder of a health technology company or a healthcare company here in Canada, as a starting point, I would very much encourage that entrepreneur to really understand, take the time to work through, the grants and incentive programs that are offered in Canada.
Canada has some of the most lucrative grant incentive programs in the G7. And by utilizing that non-dilutive capital, you can really push forward your product, your service, your solution without taking outside investor capital. And when you go to raise money from the venture-capital community or from angels, you’ll be able to present a much de-risked story to them and they can focus more on commercialization.
Nilay Thakar, Associate, ARCH Venture Partners [01:45]
It’s a very difficult space and you’re essentially married to that idea and passion of yours for a very long time. So, if you’re just thinking of starting out, obviously question it as hard as you can. Understand the difficulties, speak to other scientific founders if you can. Most are passionate enough and therefore empathetic enough to other people who are passionate about creating something in a space and therefore will take time out to speak to you.
If you still go ahead and do it, understand that you’d need exceptionally good science for this to be impactful. It’ll be very hard to reach out to venture capitalists, but it’s not impossible. Warm introductions do help. Having said that, how do you get that? Go to conferences, find meetings, send a LinkedIn requests, whatever you can to reach out to venture capitalists. Get your pitch in front of them and be patient enough throughout the whole process. And that’s about it. Have the usual ingredients of tenacity, stubbornness, patience, and some equation of luck to be understood in that whole sequence.
Brenda Irwin, Managing Partner, Relentless Venture Fund [02:46]
The advice I give to first-time founders who are going out fundraising that without a lot of experience or any experience is, “make certain that you learn as much as possible about the target investors”—that versus what is commonly referred to as, “spray and pray.” We all have an intention to invest in great entrepreneurs. We want to develop relationships. But it also is very difficult for us to make a decision about who we meet with as investors and who we don’t. So we want to know that when you reach out to us, you’ve done your homework—you know what my fund is investing in.
It’s different from what I did in my earlier venture days. And I think that that’s probably one of the most overlooked steps for first-time entrepreneurs—is really understanding and researching and not just throwing me a comment about, “I read your website, looks like we’re values-aligned.” It’s like, what specifically am I investing in? And do you fit?
Damian Lamb, Managing Director, Genesys Capital [03:46]
My advice to a startup, to any entrepreneur, or anybody that’s thinking about transitioning into the commercial side of bringing science to market, would be: you really need to believe that this is what you want to do. And you need to be persistent in it. Because it’s a slog. It’s hard, hard work.
I tell all my CEOs when they’re getting started to raise capital, even after we’ve committed, “this will be the hardest thing you’ll ever do.” And most of them don’t believe that until they finished it. And then they tell me, “that was the hardest thing I ever did.” Persistence is key. You really need to want this badly, because it doesn’t come easily. I mean, there’s a thousand “no”s for every yes you get when you’re raising capital.
What’s your favourite question to ask a founder in your first meeting? Scott Kaplanis [04:27]
I think my favourite question to ask an entrepreneur in my first meeting is to give me the sales pitch that either they are going to give to the end-client, or their sales team is going to give to the end-client. If they can convince me that they can articulate a pitch in a convincing manner to that end-client, it’s going to give me a lot of confidence in what they’re actually trying to sell. Because at the end of the day, if this business is going to be successful, you have to sell something to someone.
And it’s something that’s often overlooked in the healthcare space, where entrepreneurs are very much focused on solving a problem—the technical aspects of the problem—but commercialization and selling is often an afterthought. And so I think that question really gets into “how is this business going to work?” right from the start.